Senate, House Committees Advance PBM Reforms

A previous version of this post incorrectly named the Alliance of Community Health Plans. We regret the error.

Two congressional committees advanced notable PBM legislation, moving one step closer toward comprehensive changes to PBMs’ dominant business model.

The Senate Finance Committee, with a near-unanimous bipartisan majority, advanced a major Medicare- and Medicaid-focused PBM reform bill on July 26. D.C. insiders tell AIS Health, a division of MMIT, that the committee’s move bodes well for notable commercial market PBM reforms. So does the fact that senators of both parties are emphatically in favor of it, despite reluctance by some Republican members of the House of Representatives to make aggressive changes to PBM regulations.

Still, the Republican-controlled House Ways & Means Committee advanced a Medicare PBM reform measure of its own, the Health Care Price Transparency Act (HR 4822). The House measure stipulates that, starting in 2027, Medicare Part D beneficiaries won’t have to pay cost sharing greater than the net cost of a drug. In addition, the bill would require PBMs to report drug lists and drug costs to plan sponsors, including commercial plan sponsors. The bill passed along party lines, with Republicans in favor and Democrats voting against.

In a conversation with AIS Health a day before the hearings, James Gelfand, president and CEO of the ERISA Industry Committee, said that Democrats on the Ways & Means Committee planned to oppose the measure because they had hoped to fold in other health care policies. Those included a provision that would have required hospitals to reveal their investors, including private equity entities.

Indeed, Gelfand says that he expects the Senate to pass a PBM reform package that is more ambitious than what the House of Representatives could pass — but he also anticipates that the Senate version will win the day when a conference committee convenes. (Conference committees are composed of members of both chambers, who work to resolve in a final bill any differences in earlier, conflicting bills regarding a shared topic that have been passed by each chamber.)

The bill advanced by the Finance Committee, the Modernizing and Ensuring PBM Accountability Act (MEPA), addresses several PBM practices relating to Medicare and Medicaid. After marking up the bill on July 26, the committee advanced the measure by a bipartisan 26-1 vote, with only Wisconsin Republican Sen. Ron Johnson voting no. Further measures addressing important commercial market policies, such as banning spread pricing in PBM contracts with employers and mandating rebates be passed onto plan sponsors, were included in legislation advanced by the Senate Health, Education, Labor and Pensions Committee earlier this summer.

The Congressional Budget Office (CBO) on July 24 completed a preliminary analysis of the fiscal impact of the Senate Finance bill, finding that it could save the federal government as much as $666 million over the next five years, according to a summary of the bill prepared by the committee. Major provisions of the bill include those that would:

  • Prohibit PBMs and their affiliates from deriving income or remuneration for covered Part D drugs based on a manufacturer’s price for the drug, and instead require a “bona fide service fee” for services provided. That service fee must reflect the fair market value for PBM services and be a flat rate, rather than a fee “based or contingent upon the manufacturer list price or other related drug price benchmarks and factors.” Part D plan sponsors could continue to collect rebates, however.
  • Require PBMs to “define and apply drug and drug pricing terms in contracts with Part D plan sponsors in a transparent and consistent manner.”
  • Mandate annual reporting of drug pricing and “other information” to Part D plan sponsors and HHS: “PBMs would be required to include information related to several categories, such as information related to covered Part D drugs, drug dispensing, drug costs and pricing, generic and biosimilar formulary placement, PBM affiliates, financial arrangements with consultants, and potential PBM conflicts of interest.”
  • Allow Part D plan sponsors to audit their PBM for compliance with the bill’s provisions.
  • Oblige HHS to create, and Part D plan sponsors to comply with, “standard Part D measures for assessing network pharmacy performance.”
  • Ban spread pricing in Medicaid. Spread pricing is the business practice in which PBMs pay pharmacies dispensing a drug less than what they charge payers, with the PBM pocketing the difference.
  • Require participation by retail pharmacies in the National Average Drug Acquisition Cost Survey.

During the markup of the bill, committee leadership approved several amendments suggested by lawmakers. For example, an amendment proffered by Sen. Debbie Stabenow (D-Mich.) and Sen. James Lankford (R-Okla.) would allow a Part D plan sponsor to change the preferred or tiered cost-sharing status of a reference biologic midyear if the sponsor also adds a biosimilar for that reference product to its formulary, starting in plan year 2025.

Another amendment would require the HHS secretary “to publicly post a biennial report related to preventing, identifying, or addressing inappropriate pharmacy rejections and inappropriate coverage denials under Part D.”

Bipartisan Effort Bodes Well for Further PBM Reform

In remarks before the vote, Finance Committee Chair Sen. Ron Wyden (D-Ore.) praised the seriousness of the bipartisan collaboration behind the bill and other PBM reform measures.

“Every single member of this committee has been working in a constructive way,” Wyden said. “I want to emphasize to members that Ranking Member [Idaho Republican Sen. Mike] Crapo and I have agreed to continue to work together following today’s committee action to develop and include as many additional proposals as possible as legislation reported out of the Finance Committee moves to the full Senate. There is no shortage of bipartisan, thoughtful ideas, and I believe many of them can make it to the president’s desk.”

Gelfand and another veteran lobbyist representing employer plan sponsors praised the bill even though it does not impact the commercial market. They tell AIS Health that the bipartisan collaboration and the advancement of Medicare and Medicaid PBM reforms bode well for commercial market PBM reforms.

Gelfand said that “probably the most important thing to watch” in the markup “is how the vote breaks down along party lines. So far, it sounds like the Republicans have been equal players in this on the Finance Committee, which is encouraging, to see bipartisanship there. You have in the past had some back-and-forth on drug issues on that committee.”

The Medicare drug price negotiations included in 2022’s Inflation Reduction Act (IRA) split the committee along partisan lines, for example.

“But that’s now in the past,” Gelfand said. “So, if you get something like this…through the Finance Committee with a unanimous or nearly unanimous vote, how could it not become law?”

Alan Gilbert, vice president of policy at the Purchaser Business Group on Health, agrees that a Senate PBM package is more likely to reach President Joe Biden’s desk than legislation from the House.

The savings in the bill to the public insurance programs “are important revenue raisers,” Gilbert says, which will appeal to austerity-minded conservatives in the House Republican caucus.

Those savings are important because notable health care programs with bipartisan support, such as the Public Health Services Act, which funds community health centers, are up for renewal this year, according to Gilbert. This dynamic “will encourage House members that don’t normally want some of this stuff to go along with it,” he says.

Nonprofit Health Plans Praise Measure

The Alliance of Community Health Plans (ACHP), a trade group of nonprofit Medicaid and Medicare plans, also backed the bill in a July 25 statement.

“For too long, drug pricing in America has resembled a Ponzi scheme,” said Ceci Connolly, ACHP President and CEO. “This legislation targets appropriate entities, including PBM affiliates, addresses concerns within the broker and consultant process and moves the industry toward a cost-plus model. ACHP looks forward to working with the Senate Finance Committee to move this legislation forward.”

In praising the bill, Dan Jones, ACHP’s senior vice president of federal affairs, draws a distinction between ACHP’s membership and other health plans.

The Finance Committee “has had a very deliberate process that brought in stakeholders, worked on a bipartisan basis outlining some of the issues that they wanted to address, and, from our perspective, have done a good job at bringing some transparency into a space that needed it,” Jones tells AIS Health.

“ACHP member plans, generally speaking, sit a little bit differently than others within the industry. Because they’re not affiliated with PBMs, like many others are or are just vertically aligned in the drug supply chain that way,” he added.

Some ACHP member plans have “taken on a lot of PBM functions internally,” while others “own and operate a…transparency-based PBM,” Jones says. “And then we’ve had others that are contracting with the Big Three” — CVS Health Corp.’s Caremark, UnitedHealth Group’s Optum Rx, and The Cigna Group’s Express Scripts — “to fulfill that service.”

“So we have a variety of perspectives on it. But from all three perspectives, there was value in having more transparency, and empowering the plans to negotiate good contracts with PBMs,” Jones says. “Understanding how the money flows with PBMs, between negotiating with manufacturers, or how they work with group purchasing organizations and other kinds of avenues for the money flow helps in the ability [of ACHP plans] to negotiate a solid contract on behalf of the beneficiaries that they serve.”

PBM Group Slams Bills

Meanwhile, the Pharmaceutical Care Management Association (PCMA) slammed both the Senate Finance Committee and House Ways and Means bills.

“Unfortunately, the legislation being considered by the Senate Finance Committee and the legislation before the House Ways and Means Committee ignore the profound statutory and regulatory changes to the Medicare Part D program that are yet to be implemented due to the Inflation Reduction Act, including an out-of-pocket spending cap and new rules on cost sharing, and the uncertain and likely significant impact they may have on beneficiary premiums. The Finance bill also takes a dramatic step back from value-based payment arrangements to fee for service, at a time when CMS and private payers are encouraging rewarding value,” the PBM trade group said in a July 26 statement ahead of both committee’s votes.

“Regarding the House Ways and Means Committee vote, the legislation benefits Big Pharma by weakening pharmacy benefit companies’ ability to lower costs for drugs that already have patent protections and monopoly pricing,” PCMA added. “In addition, pharmacy benefit companies practice and support transparency that empowers patients, physicians, employers and health plan sponsors to make the best decisions to lower prescription drug costs for patients.”

Contact Gelfand at, Gilbert via James Chisum at and Jones via Nicole Dascenzo at

This article was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.

© 2024 MMIT
Peter Johnson

Peter Johnson

Peter has worked as a journalist since 2011 and has covered health care since 2020. At AIS Health, Peter covers trends in finance, business and policy that affect the health insurance and pharma sectors. For Health Plan Weekly, he covers all aspects of the U.S. health insurance sector, including employer-sponsored insurance, Medicaid managed care, Medicare Advantage and the Affordable Care Act individual marketplaces. In Radar on Drug Benefits, Peter covers the operations of (and conflicts between) pharmacy benefit managers and pharmaceutical manufacturers, with a particular focus on pricing dynamics and market access. Before joining AIS Health, Peter covered transportation, public safety and local government for various outlets in Seattle, his hometown and current place of residence. He graduated with a B.A. from Colby College.

Related Posts

July 13

New House, Senate Bills Add to Accumulating PBM Reform Proposals

June 22

Targeting Just Part D, New Bill Checks Another Item Off PBM Critics’ Wish List

May 25

House Hearing, Legislation Emphasize PBM Transparency



Sign up for publications to get unmatched business intelligence delivered to your inbox.

subscribe today